What Can The Trends At Dah San Electric Wire & Cable (TPE:1615) Tell Us About Their Returns?

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, Dah San Electric Wire & Cable (TPE:1615) looks quite promising in regards to its trends of return on capital.

Return On Capital Employed (ROCE): What is it?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. To calculate this metric for Dah San Electric Wire & Cable, this is the formula:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.16 = NT$387m ÷ (NT$3.3b - NT$925m) (Based on the trailing twelve months to September 2020).

Thus, Dah San Electric Wire & Cable has an ROCE of 16%. On its own, that's a standard return, however it's much better than the 7.1% generated by the Electrical industry.

View our latest analysis for Dah San Electric Wire & Cable

Historical performance is a great place to start when researching a stock so above you can see the gauge for Dah San Electric Wire & Cable's ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Dah San Electric Wire & Cable, check out these free graphs here.

What Can We Tell From Dah San Electric Wire & Cable's ROCE Trend?

We like the trends that we're seeing from Dah San Electric Wire & Cable. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 16%. Basically the business is earning more per dollar of capital invested and in addition to that, 44% more capital is being employed now too. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

Our Take On Dah San Electric Wire & Cable's ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Dah San Electric Wire & Cable has. Since the stock has returned a staggering 229% to shareholders over the last five years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

If you'd like to know more about Dah San Electric Wire & Cable, we've spotted 3 warning signs, and 2 of them shouldn't be ignored.

While Dah San Electric Wire & Cable isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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